Premium Bond holders were dealt a blow today after the interest rate that determines their chances of winning was slashed.

National Savings & Investment (NS&I), which administers the scheme, has announced the rate will be cut to just 1% from the start of April, from 1.8% at present. This rate will also remain in place for the May and June draws.

The cut follows a three-month rate freeze, during which time the Bank of England base rate, which many savings institutions use to decide their interest rates, crashed from 2% to an historic low of 0.5%.

In addition, there will only be one 1 million prize from April, instead of the current two millionaires created each month.

There's a potential silver lining, though. From April, NS&I is introducing a new lowest prize level of 25 which should allow more people to win. Currently, the lowest prize is 50. Yet if fifty people had 100 worth of premium bonds each, only one of them would win 50, the rest would get nothing.

However, with the rate at just 1%, the return can be hugely beaten by the top savings accounts, which pay well over 3%.

Martin Lewis, creator of, says: "The big sell of Premium Bonds is the win factor. If you've 20,000 over a year and win 50 every other month, you think you've done well, even though it's actually just a 1.5% return.

"However, if you're winning nothing, there's no getting away from the fact you're not doing well. The new 25 prize level is aimed at stopping that. But while people will win more often, overall, they will win less money than they do now."

On Our Forums

Premium Bonds